Notice how the incentive to work, for the poorest, has been undermined heavily. Housing unaffordability has contributed to this as well. Now we have to increase immigration and have more coercive welfare policies in order to force the population into indentured slavery so they may suffer poor physical or mental health early doing the coalface or boilerhouse jobs (either metaphorical or literally). The minimum wage is being undermined at the whims of industry and both labor and the coalition are captive to business.

The minimum wage causes unemployment. This is a fact. It has been proven again and again and there is no serious debate about the issue.

The latest estimate in Australia is that for every 10% increase in the minimum wage there is a 2.9% decrease in employment (from ANU economist Andrew Leigh). Using this estimate, the 2008 increase in the minimum wage lead to about 110,000 fewer jobs.

Let me stress -- fewer jobs.

It's great to say that you care about poor people, but you do not help people by making them unemployed. At some point you need to decide whether you want to help people, or whether you just want to look like you're helping people.

All people who actually care about reducing poverty, and care about helping the unemployed find work, should applaud the decision to freeze minimum wages.

I wish these "minimum wages cause unemployment" would wake up to themselves.

If you increase the price of anything you can almost always find that its employment falls.

This applies to interest rates, profits, bank charges, petrol prices, rates, rents, consumer items and so on.

So why don't our stupid economists and propagandists produce great papers and noisy media interventions demonstrating how increased prices decrease economic activity and employment generally ? ? ? ? ?

The point is NOT that increased minimum wages is linked to less purchases of labour, but they need to show that increased minimum wages cuts the demand for labour to a greater extent than increased prices generally cut demands.

Why is Humphrey's and Leigh's over-used, political, rubbish argument only dragged out in the case of minimum wages?

In any case minimum wages only rise AFTER other prices have risen, so I would be very interested to see how our academics have separated the cutbacks in labour demand due to increased prices (with wages steady) from the cutbacks in labour demand due to increased minimum wages (with other wages and prices steady).

If petrol companies can increase petrol prices then minimum wage workers must have the same ability to increase wages in response.

Minimum wages increase should never cause unemployment if the increase is matched by movements in the Henderson Poverty line. In this case all the nominal wage increase does is maintain real wages and social equity.

So the real question for Humphrey's is; how does an increase in nominal wages that is not a real increase, create unemployment

Christopher asks how an increase in the nominal (but not real) minimum wage can result in unemployment. The answer is because the current minimum wage is already causing unemployment, and so if we keep it at the same real level it will continue to cause unemployment. If we had allowed minimum wages to be 4.1% lower (by not having the 2008 increase) then we would have had an extra 110,000 jobs. What is more important... 4% more income for workers, or 110,000 new jobs for the unemployed?

Christopher is correct in saying that when you increase the price of something, the quantity demanded of that thing generally falls. He asks why economists don't produce papers showing this. The fact is there are many papers showing this, and the evidence is so overwhelming it is not in serious debate (including for labour).

Christopher suggests that we need to show the wage-employment effect is larger than any other price-demand effect. That isn't true. The relationship between wage floors and employment is true irrespective of what is happening in any other market.

He asks why the "theory of demand" is only used during minimum wage arguments. But that isn't the case. The theory of demand is central to nearly every economic discussion and economists talk about it all the time.

Christopher suggests that if petrol prices go up then minimum wages must go up. That is a non-sequitor. The price of labour (wages) and the price of petrol are caused by fundamentally different things and there is no reason to think they should change together. That would also be undesirable as petrol prices tend to go up and down, while wages (even for low-income people) have generally tended up consistently over the past 200 years.

Christopher then raises the HPI, but this has nothing to do with the effectiveness of the theory of demand. The simple truth is that if something is more expensive, people generally buy less of it.

For those who still think the minimum wage never causes unemployment, ask yourself why we don't make the minimum wage $100/hour?

Interesting.

Yes - Christopher is right. All increases have this effect, so why all the fuss about minimum wages?

John is avoiding the issue - prices of consumer items (petrol) are not "non-sequitor" to wages.

John doesn't seem to understand that the actual nominal rate of wages are irrelevant. His canard about $100 wages misses the point and the understanding.

We all know that there is a general hue-and-cry over minimum wages in particular, so John is unfortunately just blowing smoke.

I tend to agree that minimum wages do need to be indexed, whether or not this is the Henderson line or CPI doesn't really matter.

John is also confused because the relationship between wages floors and employment is affected by what happens in other markets.

For example if the distant market for machinery changes and machinery becomes cheaper, the relationship between wages and employment may be adversely affected.

If machinery becomes more expensive, in this other market, wages will benefit.

The economic linkage is through substitution and equalising returns.

If I was to add anything to the issue I would look at second effects when low wages cause less consumer consumption and a greater reliance on debt (which destroys the economy in the long-run if it increases).

So lets not target minimum wages.

Let me say I am not now, nor have I ever been an economist.

That may be evident by what I write next!

I would have thought that the demand for labour was directly related to the demand for the products and services the labour produces ?

To argue that the price of labour has an impact on employment levels separate from the demand for the work itself does not make sense to me. I thought that was what Harper was saying, the conditions in 2008 dictated that a fair size increase was sensible because of full(ish) employment ? Is that the underlying demand in the economy ?

A small increase may have a notional impact on employment but that could be offset by increased growth ?